Industry Trends
Largest Transactions Closed
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Executive Summary
M&A activity in the Business Services sector accelerated sharply in Q2 2026, with 1,070 transactions closed over the trailing 12 months, marking a 32% increase from the prior year. Strategic buyers continued to dominate with 926 deals (approximately 86.5% of total volume), targeting digital transformation capabilities across IT services, compliance, and outsourced professional services. Private equity remained selective but active, completing 144 transactions focused on scalable, recurring-revenue platforms. Valuation multiples compressed further, with median TEV/EBITDA at 10.53x and TEV/Revenue at 1.20x, reflecting sustained buyer discipline amid elevated financing costs.
"Business Services continues to attract a disciplined but motivated buyer universe, with strategics driving the majority of deal activity as they prioritize capability acquisition over organic build," said Ali Masoud, Director at PCE. "Owners who have invested in technology integration and recurring revenue infrastructure are consistently commanding the strongest outcomes in this market." The sections below detail the trends shaping this performance.
Market Dynamics
M&A activity in Business Services surged in Q2 2026, with transaction volume climbing 32% YoY to 1,070 deals over the trailing 12 months, driven by accelerating consolidation across IT services, professional staffing, and outsourced business solutions. Valuation multiples continued to compress, with median TEV/EBITDA declining to 10.53x (down from 12.37x in Q2 2025 LTM) and TEV/Revenue falling to 1.20x (down from 1.53x), as buyers maintained discipline on pricing and prioritized targets with proven profitability and scalable recurring-revenue models.
Buyer Landscape
Strategic Acquirers: Strategic buyers led with 926 deals (approximately 86.5% of total), targeting IT services, environmental consulting, and tech-enabled outsourced solutions. Notable transactions included Devon Energy’s $25.6B acquisition of Coterra Energy and Veolia’s $3.0B purchase of Clean Earth, Inc.
Financial Buyers: Private equity firms completed 144 deals, focused on scalable platforms across staffing, managed services, and professional outsourcing. Transactions such as Signal Hill Equity’s acquisition of Omni Associates Architects and Waverly Advisors’ purchase of Smithfield Trust reflect continued interest in asset-light, recurring-revenue businesses.
Industry Comparison
The Business Services sector posted its strongest volume in recent periods with 1,070 deals in Q2 2026 LTM, representing approximately 7.2% of overall M&A volume — outpacing most peer sectors and reflecting resilient structural demand for outsourced, tech-enabled services. Valuation multiples compressed to 10.53x EBITDA and 1.20x revenue, signaling continued buyer selectivity while reaffirming strong long-term interest in scalable, margin-stable business service models.
Geographic Expansion
Top U.S. States: California (114 deals), Texas (106), and New York (72) led transaction volume, supported by dense business ecosystems and strong demand for tech-enabled and compliance-driven services.
Cross-Border Trends: States like Pennsylvania (49 deals), Virginia (43), and North Carolina (36) saw rising activity, reflecting growing interest in secondary markets with lower operating costs and access to skilled regional workforces.
Notable Transactions
Largest Transactions Closed
| Target | Buyer | Value ($mm) |
| Coterra Energy Inc. | Devon Energy Corporation | $25,629 |
| Clean Earth, Inc. | Veolia Environnement SA | $3,040 |
| CSG Systems International, Inc. | Netcracker Technology Corporation | $2,963 |
| ON24, Inc. | Decision Street, LLC | $359 |
| Terra Nova Solutions, Inc. | Clean Harbors, Inc. | $225 |
| FONAR Corporation | Undisclosed | $145 |
| BaseSix Systems LLC | White Mountains Partners, LLC | $97 |
| Stratus Technology Services, LLC | Infosys Nova Holdings LLC | $95 |
| CS Digital Ventures, LLC | Olenox Industries Inc. | $51 |
| BRS Inc. | Anfield Energy Inc. | $5 |
Other Financial Buyer Transactions Closed
| Target | Buyer | Value ($mm) |
| Omni Associates Architects, Inc. | Signal Hill Equity Partners | n/a |
| Smithfield Trust Company, LLC | Waverly Advisors, LLC | n/a |
| New AeroFarms, Inc. | Palm Ventures LLC | n/a |
| ENTEGEE, Inc. | Red Dog Equity LLC | n/a |
| Cgrs, Inc. | Benford Capital Partners, LLC | n/a |
Other Strategic Buyer Transactions Closed
| Target | Buyer | Value ($mm) |
| Secuvant, LLC | Cycurion, Inc. | $3 |
| Lange Technical Services, Ltd | Advantage Surveillance, LLC | n/a |
| ACT Education Corp. | Educational Testing Service, Inc. | n/a |
| Integrated Plant Care, Inc. | RTEC Treecare | n/a |
| Land Graphics Enterprises Inc. | Osprey Landscape Group LLC | n/a |
Source S&P Capital IQ as of 7/2/2026 and PCE Proprietary Data
Emerging Trends
Key trends shaping Business Services M&A:
- AI Moves from Adoption to Strategic Execution
Professional services is the second-highest AI-adopting sector in the U.S. economy, with 62% of firms now using generative AI (nearly 3.5x the national average of 17.3%) and the performance gap between adopters and non-adopters is already measurable: 23.1% of employment at AI-adopting firms rates business performance as “excellent,” versus 13.8% at non-adopting firms. Despite high adoption, only 7% of small firms have fully integrated AI into operations, flagging a critical execution gap that is reshaping valuations and competitive positioning heading into H2 2026.2 - The Monetization Gap: Firms Delivering AI Faster Than They Can Price It
While 90% of business services firms are active with AI or will be within 12 months, only 16% have fully differentiated AI cost allocation at the project level, and just 14% are using subscription models for AI-enabled offerings. A cohort of “Front Runners” (roughly 18% of the market) is already selling AI-enabled services at scale with 30% adopting subscription models, and are 6x more confident in hitting growth targets than the broader market, signaling a structural bifurcation between firms that have figured out AI monetization and those still catching up.3 - AI Is Restructuring the Workforce and Firms Are Not Ready
As AI tools reshape how business services firms deliver work, compensation structures are fracturing in ways that signal deeper organizational strain. Staff-level salaries rose roughly 4% year-over-year while manager-level pay grew just ~1.5%, a divergence driven by firms leaning on junior talent for AI-assisted output while deferring investment in mid-level roles. This mismatch between AI-driven delivery transformation and talent strategy creates measurable retention and margin risks that firms have yet to fully address, and that buyers are beginning to scrutinize in due diligence.4 - Subsector Spotlight: IT Services
The IT services sector is undergoing a fundamental shift as firms race to embed AI into their core delivery models, 90% of business services organizations report being active with AI or planning to be within 12 months, and the gap between early movers and the rest is widening fast. Front Runner firms are already selling AI-enabled offerings at scale and are six times more likely to be confident in hitting their growth targets, signaling a structural bifurcation that is reshaping competitive positioning across the sector.3 - Subsector Spotlight: Managed Service Providers (MSPs)
MSPs are evolving beyond traditional break-fix and monitoring models toward outcome-based, always-on advisory relationships — a shift accelerated by clients demanding AI-powered managed services on a scale. The Big Four’s pivot toward multi-year managed services contracts, projected to represent one-fifth of consulting revenue at some firms within a few years, reflects the broader client appetite for bundled, tech-enabled delivery that MSPs in the mid-market are also racing to capture.3
Outlook for Next Quarter
Opportunities: AI integration is shifting from experimentation to strategic execution — firms that have formally embedded AI into workflows are already outperforming peers, and this performance gap will increasingly drive M&A premiums in Q3 2026 as buyers target platforms with proven, scalable AI capabilities. With over half of professional services organizations now actively using generative AI and even more planning or considering agentic AI, acquirers will seek targets that can accelerate their own digital transformation timelines.2
Risks: Wage inflation continues to compress margins in labor-intensive business services models — AI adoption is driving a widening compensation divergence, with staff-level salaries rising while manager-level pay lags, creating internal equity pressures that could weigh on valuations for firms that have yet to restructure their workforce and pricing models around AI-enabled delivery.5
Predicted Activity: Deal activity in Q3 2026 is expected to remain steady, with continued consolidation in accounting and professional services driven by PE-backed platforms and the accelerating bifurcation between AI "Front Runners" and laggards. Firms that cannot demonstrate a clear AI monetization strategy will face buyer selectivity and valuation pressure, making them more likely targets for tuck-in acquisitions .3
PCE Transactions
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